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Breaking the Code

As this column has previously indicated, efforts to reform the bloodstock market have been stalled since the introduction of the Thoroughbred Owners and Breeders Association’s Sales Integrity Task Force Code of Ethics in December 2004.

Not all of the task force recommendations were adopted into the new Sales Integrity Program, including medication guidelines and disclosure or regulation of certain surgical procedures. Disclosure of surgical procedures has been on hold since some consignors complained to TOBA in August 2005. One year later, TOBA conducted a survey that showed buyers wanted that information disclosed. Medication recommendations from a committee of the American Association of Equine Practitioners have been dormant since December 2005 after objections from representatives of several American sale companies.

Since the initial Code of Ethics was introduced in 2004, two high-profile lawsuits have been filed by Thoroughbred owners against their bloodstock agents for allegedly defrauding them by accepting undisclosed commissions from consignors.

Last year, one of those litigants, California winemaker Jess Jackson, successfully lobbied Kentucky’s legislature for an ethics bill that applies to the bloodstock market and clearly defines what is and isn’t legal in a relationship between an agent and principal. Jackson may return to Kentucky’s capital to seek additional legislation, including the licensing of bloodstock agents.

“We license blacksmiths, we license barbers, you license people in all kinds of industries so that there may be some punitive consequences enacted if needed,” Jackson told a Thoroughbred industry forum in Louisville, Ky., two months ago. “We don’t have any enforcement in this industry, and we need to have something in place so that we can attract new owners.”

The silence has been deafening since the tough-talking entrepreneur and attorney made those comments. No industry leaders in Kentucky have stated their support for his proposal.

Finally, from across the Atlantic came a rallying cry from Michael Goodbody, the longtime manager of the Gainsborough Stud breeding operation of the late Sheikh Maktoum of Dubai.

Speaking in England as the incoming president of the Thoroughbred Breeders’ Association, Goodbody said he has witnessed “blatant cases” of abuse during his professional career.

“It is imperative that new people, as well as existing people within the industry, are properly advised, looked after, and financially protected,” Goodbody said at a TBA awards dinner Jan. 9. “The whole system is so open to abuse that the sooner a standard code of practice is ratified internationally, the better.”

Two days after Goodbody spoke, a membership survey of the Kentucky Thoroughbred Farm Managers’ Club was released, indicating strong support for the Sales Integrity Program Code of Ethics. One of the most interesting questions and troubling answers to the survey involved whether respondents thought payments of undisclosed commissions inflated the prices of certain horses sold. Eighty-three percent answered affirmatively to that question, with 10% saying they didn’t think secret commissions increased prices, and 7% having no opinion. That answer flies in the face of consignors who suggest a secret payment to a buyer’s agent is nothing more than a “thank-you” gift.

NTRA BUDGET UNDERSTATED
Two weeks ago, in a column reviewing a “downsized” National Thoroughbred Racing Association, I misstated the organization’s estimated 2007 budget, stating that it was just over $8 million. The actual budget is slightly more than $18 million, with $8 million coming directly from membership dues.

There is an additional $8 million in revenue from NTRA sponsorships (though more than half is offset by direct expenses related to the sponsorships); $1.4 million in revenue related to mystery mutuel voucher promotions (offset largely by related expenses); and a projected $750,000 in checkoff revenue from public auction buyers and consignors and earmarked for lobbying efforts in Washington, D.C.